David Goldhill, consider our dental dystopia

David Goldhill, long an advocate of shunting all but catastrophic health care costs onto consumers (pairing super-catastrophic insurance with mandatory HSAs) offers, I must admit, a compellingly negative view of what's likely to become of cost controls embedded in the ACA or favored by the health care experts I like to read. It's a kind of mirror image of Atul Gawande's thousand flowers vision:

Through private insurance, Medicare and Medicaid, our health system relies on centralized cost control and clever adjustments to payment formulas to try to tame the beast. Traditional health experts may repackage their ideas, but they are never discouraged by past failure. So the new Accountable Care Organizations are a reinvention of H.M.O.’s. The Independent Payment Advisory Board is the new Medicare Payment Advisory Commission, or MedPAC. Bundled payments are the new Prospective Payment System.

We often see some early benefit from the introduction of new ideas, but over time such initiatives are always subjugated by our system’s nefarious economic incentives. Implement cost control reforms and watch providers circumvent new rules and guidelines. Reduce reimbursement rates for procedures, and witness providers expand the definition of required services. Convert fee-for-service reimbursements into bundled payments, and soon more severe diagnoses are given. Attempt to use government buying power, and see providers turn to lobbyists to keep prices up. We are approaching a half-century of fighting this losing battle.

It's true that power industries and interest groups are very successful at gaming new regulations. It's also true that today's reforms bear some resemblance to prior efforts.

Of venal dentists and patients' incentives

Don't get my father, 81, started on the incompetence and venality of (some) dentists. Troubled with bad teeth -- most of which he's managed to keep -- all his life, he's had several bouts of long, painful, expensive bridge work, periodontry, implants, etc. He's learned always to get two or three opinions. He loves to tell of the guy who told him he needed $4,000 worth of bridge work -- which another dentist told him was totally unnecessary, proving it with effective, much more limited treatment.

It occurs to me that dentists are likely no more venal than doctors (or members of any other profession). The difference is that since most of us don't have dental insurance, we know how much dental treatments will cost, if we care to ask. While I disagree with health care free marketeer David Goldhill's solutions to our health care crisis (ultra-high deductible insurance for all; HSAs for all; substantial services paid out of pocket), he has a point that we're apt to spend like drunken soldiers on health care when doctors tell us to, because we don't know the cost and don't bear much of it -- if we have decent coverage.

It stands to reason that many specialists, e.g., surgeons, whether out of unabashed "entrepreneurialism" or a natural tendency to believe that most people suffering from the ailments they treat will benefit from the very expensive treatments they offer, are as apt to recommend unnecessary expensive treatment as the dentist villain of my father's tale. When the procedure is high risk, many patients are likely to seek at least a second opinion. When it's not -- when the procedures are diagnostic, or hold out what seems a reasonable chance of quick relief from pain, or seem likely to eliminate what may be a very low-odds but deadly risk -- most people will go for it.

It is quite difficult to figure out the appropriate mechanisms and agency and incentives for cost-benefit analysis. Much of our problem is cultural. In a paper (fee required) on the causes of Americans' "overutilization" of medical services, Ezekiel Emanuel and Victor Fuchs identified 7 factors -- "4 related to physicians and 3 related to patients." Doctors' factors, according to Emanuel and Fuchs, are 1) training that places a premium on "enumerating all possible diagnoses and tests that would confirm or exclude them"; 2) fee-for-service, which creates incentives for overtreatment; 3) pharmaceutical marketing to doctors; and 4) medical malpractice laws. On the patient side, there is 1) the American cultural tendency "to embrace technologic fixes for problems"; 2) direct-to-consumer pharmaceutical marketing ; and 3) third-party payment for services, as outlined in this post.

Changing doctors' incentives has been the focal point of most discussion of health care cost containment. But changing the maximalist culture that patients have imbibed -- which starts by at least making costs transparent -- must also be part of the mix. No politician is going to tell the American people that. "It's your fault too" has never been a winning political message -- except to a minority, when a majority is calculated to overhear.

UPDATE: Ezra Klein, referring to the employer tax break for health care that produced our current system and so hides their cost of health care from most of us, points a way to change patient incentives:

I would like to see the tax preferences eliminated, and I would like to see every worker get the money their employer pays for their health care put back into their wages. Then I would like them to purchase health insurance on their own, so they see the full cost of it, and can decide whether they're willing to support more radical efforts to bring those costs down, or whether they're willing to accept more care management in order to save some money. This is, basically, how the Wyden-Bennett bill works, and it's why it's such a gamechanger. It's also why it has so little legislative support: It tries to solve the full problem when people only feel a small fraction of the problem.

In agreement with Klein and contra Goldhill, I would add that it makes more sense to induce people to give up a degree of autonomy over treatment courses in advance than to force each of us to factor in cost when we're up against major treatment decisions, such as whether to undergo bypass surgery.

Goldhill's health care fix: cure worse than disease?

David Goldhill's massive case for a radically "consumer-driven" health care system -- which I've always considered the worst, most Darwinian form of health care delivery -- deserves respect. I still believe that the incentives in a system where we each paid out of pocket for all medical expenses under, say, $50,000 would be even more skewed than those of the current system. But Goldhill's willingness to rethink the entire system of health care delivery raises several crucial and sobering points and claims worth thinking about, e.g.:

• While current U.S. health care spending may be more wasteful than that of any other developed country, health care inflation in countries with better systems, such as Canada and France, is almost as bad as in the U.S. No current system is controlling costs effectively. (Though Goldhill may overstate the equivalence. From 2000-2005, he claims, U.S. per capita health care spending grew 40% vs. 33% in Canada. That's not an insignificant difference.)
  
• The skewed incentives in the U.S. (and presumably other industrialized) systems go beyond those caused by fee-for-service; incentives are distorted primarily by the fact that we the consumers are not the "customers," i.e., the payers to whom the service providers are accountable.
• Health care is the only industry in which technological improvements lead to higher rather than lower costs.
• Health care is the only industry in which pricing is almost completely opaque (see Andrew Sullivan's view from your sick bed series, in which several participants have detailed the impossibility of getting pricing information in advance of service).
  
• In those few health care markets in which insurance does not kick in -- such as laser eye surgery -- competitive pricing and outcomes information have become a norm.
• Almost all of us are paying more in our working lifetime, via Medicare taxes, lost wage increases and co-pays, than we would likely spend on health care out of pocket, with catastrophic insurance.

Goldhill envisions a system in which we would each pay modestly for megacatastrophic insurance (covering expenses over, say, $50,000), make mandatory contributions to an HSA for major health care expenses, and pay smaller expenses out of pocket. The government could pay for the poor's catastrophic premiums and HSA contributions at relatively modest cost - less than that of Medicaid. Charity care would "go away." Doctors, hospitals, and specialty care facilities unleashed to compete with hospitals would be accountable to each of us for outcomes and cost.

What's wrong with this picture? I've always assumed that, faced with major surgery, it would be brutal to be forced to choose among competing surgeons based on cost and outcomes data. That's not necessarily so, if transparent data were to become the norm. Nonetheless, I think we'd all be faced with untenable cost-benefit calculations. A quadruple bypass or an operation for early stage prostate cancer may or may not be the best course of action for different patients. Should the prospect of spending $10k or $40k out of pocket tip the balance? Should such decisions be easier for the wealthy than for the middle class? (The poor would presumably be subsidized more heavily.) Not in what I would consider a civilized society.

As a counter-example to Goldhill's portrait of the laser surgery market, consider dental care, for which very few have insurance. The market is opaque and expensive, with no good outcomes data. There's nary a dentist who will not recommend more x-rays than you need. And in America today, poor teeth are a class marker; the poor generally simply don't get dental care.

Goldhill argues that bureaucratic cost controls can't control prices with the efficiency that a competitive market does. That may be true generally, but the proper comparison for health care is not with other consumer markets. The health care market is in some key ways naturally opaque. We'd be better off knowing what different surgeons charged for a prostate cancer operation. But we often can't know what we'll gain by getting the operation-- or what we'd lose (i.e., potentially, our life) if we abstained. Cost should figure into that equation -- if under certain circumstances "watchful waiting" or chemotherapy is as likely to have a good outcome as an operation. No provider should have an incentive for doing the more expensive thing. But cost shouldn't determine the individual's choice.